Under the Truth in Lending Act (TILA) and Regulation Z § 1026.23, U.S. consumers have a right of rescission for certain credit transactions secured by their principal dwelling. This allows cancellation within three business days after the later of consummation, delivery of material disclosures under § 1026.23(a)(3)(ii), or notice of the right to rescind. The period expires at midnight of the third business day following that triggering event. This federal rule applies to transactions consummated on or after September 30, 1995.

What Controls Loan Cancellation Rights

TILA, implemented by CFPB Regulation Z § 1026.23, governs the right of rescission for credit extended to a consumer where the consumer's principal dwelling is used as security, such as certain home equity loans or refinances. The rule requires the creditor to provide clear notice of this right. The rescission period begins after the later of three events: consummation of the transaction, delivery of material disclosures listed in § 1026.23(a)(3)(ii), or delivery of the notice. Without proper disclosures or notice, the period does not start reliably.

This federal rule takes precedence over state laws for covered transactions and sets the baseline consumer protection. It distinguishes legal rescission rights from voluntary lender cancellation policies or credit card billing disputes. For full text, see CFPB Regulation § 1026.23 and 15 U.S. Code § 1635.

How the Rescission Period Is Calculated

The three-business-day period runs from the triggering event and excludes weekends and federal holidays. For example, if the transaction is consummated on Friday, June 1, with disclosures and notice provided on Thursday, May 31, the period expires at midnight of the third business day after June 1, which is Tuesday, June 5. If disclosures and notice arrive later, on Monday, June 4, the period expires at midnight of the third business day after June 4, which is Thursday, June 7.

Material disclosures under § 1026.23(a)(3)(ii) must be delivered before the period can reliably start. Consumers should check loan documents for the consummation date, disclosure receipts, and notice delivery to confirm the deadline. These examples come directly from CFPB Regulation § 1026.23.

What Does Not Provide Loan Cancellation Rights

This TILA right does not cover unsecured personal loans, auto loans, student loans, payday loans, buy-now-pay-later products, or primary residential mortgages. Open-end credit plans generally fall outside this rule unless they meet specific closed-end criteria under § 1026.23. This TILA right is separate from FTC cooling-off rules for home solicitation sales, credit card chargebacks, merchant refunds, or subscription cancellations.

Lender-specific policies might allow early payoff without penalty but do not create a statutory cancellation right. Silence in loan terms does not imply a right; only TILA/Regulation Z provides this protection for covered dwelling-secured transactions.

Next Steps and Limits

To exercise the right, send written notice to the lender before the deadline, stating intent to rescind. Gather and keep: loan agreement, proof of consummation date (e.g., signing receipt), material disclosures, notice of right to rescind, and delivery confirmation (certified mail or email read receipt).

Enforcement faces a three-year limit from consummation, extendable by administrative proceeding under 15 U.S.C. § 1635 and § 1026.23. For suspected violations like missing disclosures, submit a complaint to the CFPB or state attorney general/banking department. Retain all records, as outcomes depend on specific facts.

FAQ

Does this apply to home equity lines of credit (HELOCs)?
Only if the transaction qualifies as closed-end credit secured by the principal dwelling under § 1026.23; review your disclosures for confirmation.

What counts as a business day?
Under Regulation Z, business days are generally Monday through Friday, excluding federal holidays.

Can I rescind after three days if disclosures were missing?
A three-year window may apply for material violations, but it requires enforcement action such as a proceeding; check with CFPB.

Where do I report violations?
Use consumerfinance.gov/complaint or your state attorney general's office.